Gordons Digital Innovations Limited (GDI) has just implemented a new initiative which is expected to significantly improve their customer experience, giving them a significant advantage over their rivals. It is estimated that this advantage should cause them profits to grow at a much faster rate over the next three years. GDI is expected to pay a dividend of $8.35 next year, and dividends are projected to grow at rates of 25%, 20% and 15% respectively over the next three years. The growth rate after this period will be 4% for the foreseeable future. Their cost of capital is 28%.

i.) Calculate the expected share price today (P0). (Round dividends to 2 decimal places) (10 Marks)

ii.) Calculate the expected share price one year from today (P1). (7 Marks)

iii.) Calculate the expected share price three years from today (P3). (4 Marks)

b) Gordons Digital Innovations Limited (GDI) has two preferred stocks on the market. The dividend rate, Required Return and Par Value of each preferred stock is presented in the table below.

Name Dividend Rate Required Return Par Value Series

A 4.4% 12.5% $140

Series B 5.5% 1 1.5% $120